In September 2025, U.S. President Donald Trump’s sweeping announcement imposing a 100% tariff on branded and patented pharmaceutical imports from October 1, 2025, saw India’s pharmaceutical industry, which has long been hailed as the “pharmacy of the world”, standing at a crossroads. The U.S.’s move, ostensibly aimed at bolstering domestic manufacturing, threatens to disrupt supply chains that have saved the U.S. health-care system billions of dollars while also fuelling India’s export-led growth.
Yet, as tariffs ripple through global markets, India’s dominance in generics offers a vital buffer, even as it underscores the urgent need for diversified partnerships and domestic reforms. With pharma exports to the U.S. alone reaching close to $9 billion in fiscal 2025 — a 14.29% surge year-on-year — the stakes could not be higher for India’s $50 billion pharmaceutical sector, which contributes nearly 1.72% to the nation’s GDP.
A global perspective
Global pharmaceutical exports, valued at over $850 billion in 2024, thrive on aging populations, chronic diseases, and post-COVID-19 pandemic innovation. Germany ($119.85 billion), Switzerland ($99.08 billion), and the U.S. ($90.30 billion) were lead exporters in 2023-24, while the U.S. ($212.67 billion in imports in 2024), Switzerland, Germany, Belgium, and China top importers. The European Union (EU)’s €313.4 billion in medicinal exports in 2024, up 13.5%, reflects resilience amid geopolitical tensions. India, the third-largest exporter by volume, shipped $27 billion in 2023, rising to $30.47 billion in FY25.
Generics dominate, with 70% of exports to the U.S. and Europe. However, $5 billion in annual imports, mainly active pharmaceutical ingredients (API) from China (72% share), exposes supply chain risks. The sector’s 10%-12% CAGR adds 0.5%-1% to GDP growth annually, bolstering forex reserves. The U.S. tariff, which has spared generics for now, targets branded drugs unless made domestically. India supplies 40% of U.S. generics, saving payers $219 billion in 2022. Yet, the market jitters were immediate with the shares of pharma majors falling and erasing millions in market cap. An escalation to generics could cut export revenues by 10%-15%, trimming GDP growth by 0.2%-0.3% in FY26. Some firms with over 30% U.S. exposure, face rerouting costs, regulatory hurdles, API inflation (up 5%-7%), and stalled research and development. This could spur “China-plus-one” strategies, redirecting exports to Africa and Southeast Asia, potentially raising India’s regulated market share from 3% to 3.5% by 2030.
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India’s Goods and Services Tax (GST) rationalisation, effective September 22, 2025, provides domestic ballast. Drug and medicine rates dropped from 12% to 5%, with 36 essential items at nil, saving consumers $1.2 billion annually. Medical device rates fell from 18% to 5%, easing $5 billion in imports. No re-labelling for pre-September stocks minimises disruptions. Aligned with Ayushman Bharat, this boosts consumption by 8%-10%, insulating markets from tariff-driven hikes.
On eastern scale
Global trade pits western innovation against eastern scale. Under the U.S.-EU pact, EU exports of medicinal and pharmaceutical products to the U.S. ($65.7 billion from Ireland in 2024), prioritises supply chain security. China’s 2025 agreements, capturing 32% of Q1 global biotech deals, and $2.5 billion in U.S. molecule licensing in H1 2025, signal eastern strength. India’s diplomacy has seen the signing of six memoranda of understanding (MoU) with Trinidad and Tobago in July 2025 (it includes cooperation in pharmaceuticals), a Singapore API pact, and Serum Institute’s dengue treatment collaboration for low-middle-income nations. These, alongside iPHEX (the international pharmaceutical exhibition) could double exports to Africa significantly. With 35% of pharmaceutical exports U.S.-bound, eastern alliances could offset 20%-25% of tariff risks.
Bullish forecasts
Forecasts paint a bullish canvas: India’s pharma market, valued at $50 billion in 2023-24, has a goal of reaching $130 billion by 2030 (11%-12% CAGR), with exports surging to $120-$130 billion. Globally, spending could hit $1.5 trillion by 2029, fuelled by biosimilars and precision medicine. India’s API sector could grow to ₹1.82 trillion by 2030 ($22 billion), with PLI schemes reclaiming 20% domestic production.
Challenges such as IP disputes and API dependency persist, but resilience shines through initiatives such as Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP). Under the PMBJP, a total of 16,912 Jan Aushadhi Kendras have been opened (June 2025), with 2,110 medicines and 315 surgicals, medical consumables and devices under the scheme product basket.
Tariffs threaten affordability, with U.S. cancer therapy costs potentially rising $8,000-$10,000 for a 24-week course, mirroring India’s 60% out-of-pocket burden. Generics, 80% cheaper, enable 20 million treatments yearly, though quality concerns and disruptions risk delaying surgeries by 15%-20%. PMBJP’s oncology basket, cutting costs by 70%, proves that domestic buffers work.
U.S. tariffs risk causing shortages if India’s 40% generic supply frays. India must leverage MoUs, invest $10 billion in APIs via PLI 2.0, and push WTO reforms. With global pharma eyeing $450 billion for India by 2047, collaboration in the form of east-west hybrids, innovation, and equitable access is key. Policymakers must diversify boldly, reform swiftly, and secure India’s pharma supremacy.
R.H. Pavithra is Professor, Department of Studies and Research in Economics, Karnataka State Open University, Mysuru, Karnataka
